There has been a progression in audio standards analogous to HD video. Stereo (two channel variety) » Dolby prologic » Dolby digital/dts » Dolby atmos or similar.
Atmos being the next. Technology step with vector encoded multichannel.
And the difference between two channel and a good multichannel encode can be huge perceptually. As can the difference between canned sound effects and environmentally correct raycasted sound.
But none of that matters... because many of you are correct in that far fewer people seem to care about improved audio quality than do video quality. Most people are perfectly happy with crappy TV speakers. In fact, even if they listen to and acknowledge the huge, easily audible difference a proper multichannel system brings, they are still apt to just say "meh, sounds great but I'm fine with what I have."
Part of that, maybe a big part, is that good multichannel that doesn't handcuff you with headphones (and even then the effect is lacking) takes space, isn't trivially cheap, requires some knowledge about placement and setup, probably requires even alterations to the room itself to achieve the best results, and still the risk is always there that your expensive audio gear will sound no better than crappy Bose because of poor setup.
But there's something more, I think related to how our sense of hearing evolved. We seem more adept at "hearing through" the delivery to concentrate on the content. Even me, a musician, audiophile, and at times owner of some quite nice audio gear, has no difficulty enjoying a great performance of a beautiful piano work recorded in the 60's and played back through a mono clock radio. Sure, I'd rather listen on a great system, and perhaps the emotional connection would then be quicker and even stronger, but the pitiful quality of recording and playback seems easily enough ignored even by someone who likes to think he demands audio perfection.
So getting widespread adoption of Dolby atmos or even good Dolby digital in the same manner as HD TV is always going to be an uphill battle. But even having said all that, I think MS made a good choice with the audio hardware and I'm glad they did. This is a console targeting a small segment of the population willing to spend money on good entertainment, and are more likely han average to appreciate the improvements. Especially if the transistors were essentially free, handle kinect tasks that are integral to MS vision for the console, and free up CPU resources that may benefit games in other areas.